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low risk but is not worth making if it pays back a very low return. In Silicon Valley, we

have become rich (San Jose has the highest per capita income in the United States) by

making many very risky bets, some of which turned out to be colossal winners, like the

microprocessor chip. No company in Silicon Valley has ever had the size or assets of

General Motors, yet most of us have taken big risks--to get even bigger returns.

Analyzing return on investment rather than risk shows which poor investments get foisted

off on the government: the ones that have high risk and an ordinary return. The corporate

mentality of investing "free" government money is straightforward: "We would never

invest our corporate money in this Edsel of a project, but if the government invests in it,

great. If the Edsel succeeds, it will be a nice business; if not, we have not lost anything."

Medium-return, high-risk investments are sold to the government using

technobabble. For example, I have a Ph.D. in transistor physics. I could convince

Congress that there is a national imperative to build gallium arsenide wafers in the

near-perfect vacuum of space to achieve near-perfect tetrahedral crystals with very high

electron mobility. I would persuade Congress by using a modified form of the classic

"Russian missile gap" argument, which worked so well for the Defense Department during

the Cold War. I would paint a picture of a potentially catastrophic technical threat, with

which our foreign competitors could wipe out an entire American industry segment.

Federal lawmakers would support the project. (As a matter of fact, Congress did.)

Then I could come back later and tell you that my original technology calculations

were in error and that a more refined version of an existing technology--indium

antimonide--could save the day. Given that I am a credible scientist from a credible

corporation and that few members of Congress are scientists, lawmakers would be hard-

pressed to challenge my assertions. Washington's technical experts would be of no help in

dealing with me--they are the ones Silicon Valley companies like mine did not hire.

I would not even have to be dishonest or a cynic to mislead Congress. I spend

many working hours exercising my skills as an engineer-businessman to figure out which 1

in 10 of the ideas presented to me is a worthy investment for our shareholders. I often say

no to well-meaning engineers in our company who are convinced that their high-risk,

medium-return idea is really a medium-risk, high-return idea. Indeed, most Silicon Valley

entrepreneurs don't start new companies to become technomillionaires but to prove their

old bosses wrong, to show that their great ideas were misjudged. I founded Cypress

Semiconductor Corporation 14 years ago precisely for that reason. Making difficult

technology decisions professionally is what Silicon Valley is about. Whenever a dollar is

transferred from San Jose to Washington, that dollar's chances of being invested produc-

tively diminish greatly.

High-Tech Corporate Welfare

Let's look at a few case studies of corporate welfare for high-tech businesses.